Correlation Between Focus Home and HEALTHSTREAM (HL5SG)

Can any of the company-specific risk be diversified away by investing in both Focus Home and HEALTHSTREAM (HL5SG) at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Focus Home and HEALTHSTREAM (HL5SG) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focus Home Interactive and HEALTHSTREAM, you can compare the effects of market volatilities on Focus Home and HEALTHSTREAM (HL5SG) and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Focus Home with a short position of HEALTHSTREAM (HL5SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and HEALTHSTREAM (HL5SG).

Diversification Opportunities for Focus Home and HEALTHSTREAM (HL5SG)

-0.13

Correlation Coefficient

Focus Home  HEALTHSTREAM (HL5SG)

Good diversification

The 3 months correlation between Focus and HEALTHSTREAM is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and HEALTHSTREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEALTHSTREAM (HL5SG) and Focus Home is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Focus Home Interactive are associated (or correlated) with HEALTHSTREAM (HL5SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEALTHSTREAM (HL5SG) has no effect on the direction of Focus Home i.e., Focus Home and HEALTHSTREAM (HL5SG) go up and down completely randomly.

Pair Corralation between Focus Home and HEALTHSTREAM (HL5SG)

Assuming the 90 days horizon Focus Home is expected to generate 12.07 times less return on investment than HEALTHSTREAM (HL5SG). In addition to that, Focus Home is 2.09 times more volatile than HEALTHSTREAM. It trades about 0.01 of its total potential returns per unit of risk. HEALTHSTREAM is currently generating about 0.14 per unit of volatility. If you would invest  2,677  in HEALTHSTREAM on October 23, 2024 and sell it today you would earn a total of  383.00  from holding HEALTHSTREAM or generate 14.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Focus Home Interactive  vs.  HEALTHSTREAM

Focus Home Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HEALTHSTREAM (HL5SG)

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HEALTHSTREAM are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEALTHSTREAM (HL5SG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Home and HEALTHSTREAM (HL5SG)

The main advantage of trading using opposite Focus Home and HEALTHSTREAM (HL5SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Home position performs unexpectedly, HEALTHSTREAM (HL5SG) can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HEALTHSTREAM (HL5SG) will offset losses from the drop in HEALTHSTREAM (HL5SG)'s long position.

The idea behind Focus Home Interactive and HEALTHSTREAM pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.